John Keells Holdings (JKH) believes the variable rent component from the City of Dreams Sri Lanka casino could become payable starting next year, as earnings from the integrated resort’s rental and other components more than offset an EBITDA loss at its hotel during the September quarter, according to its top management.
Speaking at the group’s investor webinar on Wednesday, JKH Deputy Chairperson and Group Finance Director Gihan Cooray declined to disclose the performance threshold that triggers the variable payment, but indicated that gaming operations were approaching that point.
“If you look at the run rate or the momentum that we are seeing in our current gaming operations, we are coming into that point where we are seeing good momentum. It’s reached a certain scale and if that momentum continues, there’s no reason to believe why from maybe next year onwards we could potentially start seeing that,” Cooray remarked, cautioning that giving an exact view was difficult.
JKH, through its subsidiary Waterfront Properties (Private) Limited, leases the casino space to Melco Resorts & Entertainment and has recognised only the fixed rental since the casino opened in August 2025.
City of Dreams Sri Lanka recorded an EBITDA of Rs.340 million for the quarter ended 30 September, against a loss of Rs.64 million a year earlier, according to JKH’s interim financial statements filed with the Colombo Stock Exchange. However, the figure was 12.6 percent lower than the Rs.389 million posted in the June quarter. For the first half, the resort’s EBITDA stood at Rs.729 million, a turnaround of Rs.1.79 billion from the Rs.1.06 billion loss recorded in the same period last year.
The retail, gaming rental and other components contributed Rs.364 million to the quarter’s EBITDA, 16.7 percent more than the Rs.312 million in the previous quarter. The 800-room hotel, on the other hand, swung to an EBITDA loss of Rs.24 million from a profit of Rs.77 million. Rental income from the Offices at Cinnamon Life is recorded under the Property segment and is not included in these figures.
Hotel occupancy edged up to 45 percent from 44 percent in the June quarter, while the average room rate rose 7.4 percent to US$ 116 from US$ 108. Even so, the hotel’s EBITDA margin slipped to negative 0.7 percent from 2.4 percent, which JKH attributed to higher electricity and ramp-up costs.
Cooray also pointed to one-off charges, including online travel agent commissions and IT costs.
“It was marginally negative at that number, so a slight increase in either occupancy or ARR will bring it to a point where we can break even,” Cooray explained, adding that occupancy of 50 to 60 percent would turn the hotel into a positive contributor. The hotel had recorded 61 percent occupancy in the March quarter, before the full impact of the Middle East conflict was felt.
Meanwhile, Melco’s results for the same three months showed its Colombo operations generating revenue of US$ 17.6 million, nearly three times the US$ 6.1 million recorded a year earlier, when the casino had been open for only two months. Revenue was also 4.1 percent higher than the US$ 16.9 million in the previous quarter. Adjusted EBITDA before rent rose 14.3 percent quarter-on-quarter to US$ 4.0 million. The rent expense Melco booked for the Colombo casino stood at US$ 1.83 million, up just 2.2 percent from US$ 1.79 million a year earlier, which is consistent with only the fixed component being paid.
Below the operating line, the resort’s loss before tax narrowed 65 percent to Rs.1.19 billion from Rs.3.39 billion. Interest costs fell 36.6 percent to Rs.882 million from Rs.1.39 billion after the US$ 189 million syndicated loan was refinanced in March and pared down to US$ 150 million by end-September. The resort also booked an exchange gain of Rs.896 million as the rupee firmed during the quarter. Excluding exchange movements, the loss stood at Rs.2.09 billion, 27 percent narrower than the Rs.2.87 billion recorded a year earlier.
JKH Chairperson and CEO Krishan Balendra expects a substantial part of the mall, including the cinemas, to be tenanted and operational over the next few months, indicating a timeline of around March. In July, the company had targeted the end of this calendar year.
